Politicians love their buzzwords and talking points, and the Joe Biden White House and the Democratic Party use them as much or more than when Donald Trump and the Republicans ran Washington’s freak show. Last year, the mantra from the Biden administration was that inflation was “transitory,” meaning that the inflation would not last long. From Biden (when he could remember what his talking points were supposed to be) to Paul Krugman in the New York Times, the faithful repeated the newest word of life: “Transitory.”

All of a sudden everyone is an expert on inflation. Your brother-in-law, your local paper, and even dilettantes at dubious outlets like the Washington Post or The Atlantic feel compelled to explain our current predicament. With the admitted rate of consumer inflation running somewhere around 8 percent, and the real rate much higher, even central bankers can’t hide the reality from us. So the commentariat has to explain to us why this is happening and make sure we blame the mysterious workings of capitalism for our troubles.

First pollution would cause a new ice age unless we destroyed capitalism and replaced it with socialism and central planning.

That didn’t work out, so then we were told that capitalism was causing global warming and therefore must be destroyed and replaced with socialism and central planning.

That didn’t work out either, so then we were told that capitalism is causing climate change and therefore must be destroyed and replaced by socialism and central planning.

In the spring of 2020, many politicians and economists were in agreement: the American public needed help shouldering the financial burden of COVID-19. The unemployment rate tripled from the fourth quarter of 2019 to the second quarter of 2020, sitting at a staggering thirteen percent. In response, there was near-unanimous bipartisan support for efforts to bring relief to U.S. citizens. Amongst a host of other fiscal actions was the deferment of federal student loan debt.

The conventional view among mainstream economists, as presented by Milton Friedman, is that three factors determine market interest rates: liquidity, economic activity, and inflationary expectations.

In this viewpoint, whenever the central bank raises the growth rate in the money supply by buying financial assets such as Treasurys, this pushes the prices of Treasurys higher and their yields lower. Note that this is the monetary liquidity effect, which inversely correlates with interest rates.